Single premium immediate annuity with adjustable payment

ABSTRACT

A method for providing a financial instrument includes providing a processor. The method also includes generating, using the processor, an annuity comprising a fluctuating annuity payment and an option to fix the fluctuating annuity payment and setting a payment schedule for the fluctuating annuity payment.

CROSS-REFERENCES TO RELATED APPLICATIONS

This application is a continuation of U.S. patent application Ser. No.13/168,316, filed on Jun. 24, 2011, which is a continuation of U.S.patent application Ser. No. 12/838,257, filed on Jul. 16, 2010, which isa continuation of U.S. patent application Ser. No. 11/735,203, filed onApr. 13, 2007, now issued as U.S. Pat. No. 7,783,550, which claims thebenefit of U.S. Provisional Patent Application No. 60/919,775, filedMar. 22, 2007. The contents of each of the above-referenced U.S. patentapplications are hereby incorporated by reference in their entirety.

BACKGROUND OF THE INVENTION

The application relates generally to financial products known asannuities. An annuity is an insurance policy including a guarantee thatthe issuer will make a series of payments. This policy is usually givenin exchange for a sum of money that the issuer may invest in short orlong term investments. There are two types of annuities, immediateannuities and deferred annuities. An immediate annuity is an annuitywhere the annuitant receives payments immediately and a deferred annuityis one where the annuitant receives a lump sum at the end of a timeperiod. The advantage of the deferred annuity is that generally theaccount is not taxed until the lump sum is paid. Generally immediateannuities are structured so that the payment varies with the performanceof a specific set of investments, or an index. Typically, in prior artimmediate annuities the interest rate used to calculate the varyingpayments is set at the time the annuity is purchased. Since the interestrate is fixed at the time of purchase, individuals who are thinking ofpurchasing an annuity will generally try to avoid buying one wheninterest rates are low because they will then be stuck with a lowinterest rate for the life of the annuity.

SUMMARY OF THE INVENTION

A single premium immediate annuity allows the annuitant to receive anadjustable payment based on a fluctuating interest rate until theannuitant exercises an option to fix the rate (e.g., when the interestrate is high, when the annuitant desires a set known payment, etc.). Theannuity described more fully herein gives annuitants more options andmore reasons to enter into annuity contracts even with the market may beconsidered to be currently unfavorable.

A fluctuating annuity payment is determined and generated, and thatannuity payment is subsequently fixable. The fluctuating annuity paymentmay be based on an interest rate, such as the market yield of a 1-yearU.S. Treasury adjusted to constant maturity, for example. Thefluctuating annuity payment may be determined on a certain date, orperiodically, for example. The annuity payment, while fluctuating, mayhave a predetermined floor or minimum threshold amount that is does notpay less than. At some point, a request may be received to fix thepayment, and the fluctuating annuity payment is converted to a fixedannuity payment. The fixed annuity payment may be based on a long terminterest rate, for example. After receiving a request to fix the annuitypayment, a payment schedule may be determined based on the value of theremaining payments that are to be made.

The foregoing is a summary and thus contains, by necessity,simplifications, generalizations and omissions of detail. Those skilledin the art will appreciate that the summary is illustrative only and isnot intended to be in any way limiting.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a diagram of an example system in which example techniques forproviding adjustable annuities may be implemented.

FIG. 2 illustrates an operational flow representing example operationsrelated to providing adjustable annuities including additional optionaloperations.

FIG. 3 illustrates an operational flow representing example operationsrelated to fixing a fluctuating annuity payment including additionaloptional operations.

FIG. 4 illustrates additional alternative embodiments of the exampleoperational flow of FIG. 3.

FIG. 5 illustrates additional alternative embodiments of the exampleoperational flow of FIG. 3.

FIG. 6 illustrates additional alternative embodiments of the exampleoperational flow of FIG. 3.

FIG. 7 illustrates an operational flow representing example operationsrelated to fixing a fluctuating annuity payment including an additionaloptional operation.

FIG. 8 illustrates additional alternative embodiments of the exampleoperational flow of FIG. 7.

FIG. 9 illustrates additional alternative embodiments of the exampleoperational flow of FIG. 7.

DETAILED DESCRIPTION OF THE INVENTION

FIG. 1 is a block diagram of an example system in which aspects of theinvention may be embodied. The following paragraphs describe theelements in FIG. 1 briefly, and the elements depicted in FIG. 1 will bedescribed in more detail within the context of the operationalprocedures described below. Those skilled in the art will note that someelements depicted in the block diagram are indicated in dashed lineswhich in general and throughout the disclosure, is indicative of thefact that they are considered optional.

One or more users 101 through 101-N (where N is an integer greaterthan 1) utilizing associated computing devices 116, referred to hereinas clients, are desirably in communication with an annuity provider 150via a network, such as the internet. The annuity provider 150 mayinclude in some embodiments an application server 140, e.g., a servercomputer operating in a computer network dedicated to running one ormore software application programs including a website 115. Theapplication server 140 that is optionally located at the annuityprovider's location 150 may be electronically connected to a databasemanagement module 102, e.g., one or more software programs that operatesand maintains databases 112. The database management module 102 can bepart of the annuity provider's database 104 that includes a list ofusers 101-101-N and their associated annuities 106 and database ofinformation 112.

The annuity provider 150 may optionally have at its location one or moreannuity agents 101-A and their associated terminals 110. The terminalsmay include an application program 108 that allows the agent 101-A toaccess the database 112 and manipulate the data stored in the database112. Also shown in FIG. 1 is remote host 114 which includes a database112. The database 112 may include interest rates currently available or,in some embodiments the database may include an index which is astatistical measure of change in an economy or a securities market.

One skilled in the art will recognize that the operational stepsillustrated in FIGS. 2-9 are examples and other embodiments exist. Thoseskilled in the art will note that some operations in FIGS. 2-9 areindicated by dashed lines, which, in general, indicates that they are tobe considered optional. More specifically, different implementationswill typically employ one or more herein-described operations dependentupon context, and the selection of the appropriate operation(s)appropriate to the various context(s) is within the skill of one in theart in light of the teachings herein.

FIG. 2 illustrates example operations related to providing an incomestream including operations 200-202. Operation 200 begins an exampleoperational process, typically at an annuity provider pursuant to makingan annuity payment to the beneficiary of the annuity. Operation 202illustrates generating a fluctuating annuity payment, wherein theannuity payment amount is subsequently fixable. For example, a databasemanagement module 102 of annuity database 104 generates a fluctuatingannuity payment for a specific annuity 106 belonging to a specific user101. The database management module 102 may include database managementsoftware, e.g., software designed for the purpose of managing a database104 such as one or more software programs included in a software packagethat controls the organization, storage, and retrieval of data in one ormore databases. The database management software may additionallyinclude one or more programs operable to perform various operations onthe data stored in the database 104 including software to calculate afluctuating annuity payment by receiving variables such as theannuitant's age and gender, the mortality factors, the value of theadjustment base on a measurement date. Desirably, computer softwaredesigned to manage a database of annuities calculates a payment to betransmitted to a user 101.

In other example embodiments the operational flow 200 may include, forexample, operation 204 that depicts determining the fluctuating annuitypayment based on an interest rate. For example, database managementmodule 102 determines a fluctuating annuity payment wherein the annuitypayment is based on a changing interest rate. The database managementmodule 102 may retrieve an interest rate from a database 112 (thedatabase 112 may optionally be a hosted by a remote host 114 and may beconnected to the annuity database 104 via a network connection such asthe internet, or the annuity provider 150 may optionally include andatabase 112). The database 112 may include one or more interest ratesof one or more securities at the time of calculation. As one skilled inthe art will note, the interest rate utilized in operation 206 may be,for example, based on a combination of factors including but not limitedto a combination of investments the provider 150 can purchase at thetime, the provider's competitive strategy, the provider's expenses andcapital structure. The database management module 102 may utilize acurrent interest rate retrieved from the database 112 in determining afluctuating annuity payment for a specific annuity stored in a databaseof annuities 106.

Additionally or alternately, the operational flow 200 may includeoperation 206 depicting determining the fluctuating annuity paymentbased on the market yield of a government security adjusted to constantmaturity. For example, database management module 102 determines afluctuating annuity payment wherein the annuity payment is based, forexample on the initial interest rate and the change in the market yieldof a 1-year U.S. Treasury adjusted to constant maturity. The databasemanagement module 102 may retrieve information from the Federal ReserveBulletin Release H.15, for example, from the websitewww.federalreserve.gov and utilize the information in determining afluctuating annuity payment. For example, computer software designed tomanage a database of annuities retrieves market yield information fromthe internet and uses the information to calculate a fluctuating annuitypayment.

Additionally or alternately, the operational flow 200 may includeoperation 208 which illustrates a generating fluctuating annuity paymentthat does not go below a predetermined minimum payment. In embodimentsthat include this operation a database management module 102 may checkto see if the determined annuity payment is greater than an agreed uponminimum payment. For example, computer software may include a procedurefor comparing the calculated fluctuating annuity payment to a minimumpayment defined in a contract and determine what payment is greater. Thegreater payment is then provided to the user 101 or a user'sbeneficiary. In this manner, the user 101 or beneficiary is guaranteedto at least receive a minimum payment regardless of the factors that maybe used in determining the fluctuating annuity payment.

Additionally or alternately, the operational flow 200 may includeoperation 210 which determines the fluctuating annuity payment onpredetermined date. For example, database management module 102 mayretrieve information from an insurance contract to determine a date,e.g., once a month or once a year, that the associated computer softwareis to calculate a fluctuating annuity payment.

As depicted by example operation 414 of FIG. 2, a request may bereceived, e.g., from the annuity purchaser or beneficiary, to fix thepayment. In this manner, the fluctuating payment is fixed and no longerfluctuates. The fixed payment amount is determined by the provider 150.For example, database management module 102 of annuity database 104receives a request to fix a fluctuating annuity payment from a user 101or an annuity provider's terminal 110 and generates a fixed annuitypayment.

The database management module 102 may receive requests from one or moreclients 116. The clients may transmit a request to fix a payment over anetwork connection to a website 115 maintained by an application server140. The website 115 may be operable to receive requests to fix annuitypayments by transmitting code such as html code to client 116 that isoperable to generate one or more web pages including an option to fix anannuity payment.

The database management module 102 may receive requests from an annuityprovider's terminal 110. The annuity provider's terminal 110 may includean application program 108 that is operable to query the databasemanagement module 102 and submit requests to fix annuity payments. Oneskilled in the art will note that the invention is not limited to thesedisclosed embodiments and additional embodiments exist.

As depicted by operation 516 of FIG. 2, once the database managementmodule 102 of annuity database 104 has received a request to fix anannuity payment, the database management module 102 may create a paymentfor the user 101 based on one or more factors such as the interest ratesat the time the annuity payment is being fixed. In embodiments thatinclude optional operation 516 the fixed annuity payment amount may bebased on a long term interest rate, such as the long term interest rateof a long term fixed income security or the interest rate on a note orbond that matures in at least 10 years.

FIG. 3 illustrates example operations related to fixing a fluctuatingannuity payment including operations 600-606. Operation 600 begins anexample operational process to fix a previously established fluctuatingannuity payment. A request to fix the fluctuating annuity payment isreceived at, for example, a database management module 102. The databasemanagement software 102 may have received the request from, for example,a user 101, an agent 101-A or any other user that has the ability to fixa periodic fluctuating annuity payment. The database may include arelational database, an object oriented database, or any electroniccollection of records. For example, a database management system, e.g.,computer software designed for the purpose of managing a database,receives a request to fix a fluctuating annuity payment from aninsurance agent's terminal.

As depicted by operation 604 of FIG. 3, the value of one or moreremaining adjusted payments is determined using an interest rate. Inembodiments that include operation 604, the interest rate may be equalto the rate utilized to calculate the most recent fluctuating payment.This rate may be retrieved and used, along with discounting the sum ofthe remaining payments utilizing the retrieved interest rate in order todetermine the value of the remaining payments.

As depicted by FIG. 3, the operational procedure 600 may additionallyinclude operation 606. In embodiments that include operation 606 thefixed annuity payment amount is then generated from value determined atby operation 604. For example, database management module 102 of annuitydatabase 104 may create a fixed annuity payment from the sum of theremaining adjusted payments discounted to present value and the currentinterest rate appropriate for a fixed annuity.

FIG. 3 additionally depicts the example operational flow 600 includingadditional optional operations 708, 810, and 812. In example embodimentsthat include operation 708 the fluctuating annuity payment may be basedon the market yield of a 1-year U.S. Treasury adjusted to constantmaturity. In such a case, the payment fluctuates due to changes in themarket yield of a 1-year U.S. Treasury adjusted to constant maturity.

As depicted by operations 810 and 812 of FIG. 3, the fixed annuitypayment may be at least a predetermined minimum payment amount or basedon a fixed interest rate 812. If the fixed annuity payment is determinedto be less than a predetermined minimum amount, then the fixed annuitypayment is set equal to the predetermined minimum amount, and thepayment amount that had been calculated based on the factors used (e.g.,interest rates) is not used. The predetermined minimum amount may behave been determined when the annuity was first issued or may have beendetermined subsequent to the issuance of the annuity.

If the fixed annuity payment is to be based on a fixed interest rate,then for example, the interest rate used may be that used for a singlepremium annuity, at 914 of FIG. 4. For example, database managementmodule 102 of annuity database 104 may create a fixed annuity paymentfrom the sum of the remaining adjusted payments and an interest rateused for a single premium immediate annuity.

In some example embodiments of the operational procedure 600 theprocedure may include operation 1016 as depicted by the operationalprocedure 600 of FIG. 5. In embodiments that include operation 1016, thefluctuating annuity payment amount may be adjusted on a predetermineddate, e.g., a certain date of each month or each year similar tooperation 212 described above.

According to another embodiment, the operational procedure 600 mayinclude operation 1118 as depicted by FIG. 6. In embodiments thatinclude operation 1118, the present value of the remaining adjustedpayments may be placed into a long term investment. For example,database management module 102 may retrieve an amount of money equal tothe present value of the sum of the remaining adjusted paymentsdiscounted to present value from a bank account controlled by theannuity provider 150. This amount may be taken by the provider 150 andinvested in a long term investment such as one or more fixed incomesecurities. In this manner, the annuity provider 150 can strategicallyinvest in long term investments knowing that the annuitant will receivea fixed income as opposed to a fluctuating payment for the rest of thecontract.

FIG. 7 illustrates example operations related to fixing a fluctuatingannuity payment including operations 1200-1204. FIG. 7 additionallydepicts the example operational flow 7 including additional operations1306 and 1408.

Operation 1200 begins the operational process, e.g., pursuant to arequest to create an annuity. In embodiments that include exampleoperation 1202, an annuity is created that includes a fluctuatingannuity payment and an option to fix the fluctuating annuity payment inthe future. Thus, the user 101 or beneficiary is able to convert thefluctuating annuity payment to a fixed payment in the future.

For example, an annuity provider 150 creates an annuity for a specificuser 101, the annuity including a provision for a fluctuating annuitypayment and a provision that allows the user to fix the fluctuatingannuity payment. The annuity provider 150 may include a databasemanagement module 102 of an annuity database 104 including data entriesrepresenting annuities 106 issued to users 101 in generating such anannuity. The database management module 102 may generate such an annuityafter it receives a request for an annuity from, for example, anapplication program 108 residing on an annuity provider agent 101-Aterminal including a user's 101 or from an application server 140 thatmaintains a website 115 configured to receive requests for annuitiesfrom computer systems associated with users 101 through 101-N. Theapplication server 140 may transmit such requests to the databasemanagement module 102 for processing and in response the website 115 maytransmit code operable to display the annuity on a user's computersystem. The request may include information such as age, health, thepremium paid, or any type of information an annuity provider wouldutilize in generating an annuity.

Operation 1204 illustrates setting a payment schedule for thefluctuating annuity payment. For example, an annuity provider 150creates a payment schedule for the generated fluctuating annuitypayment, e.g., setting whether the annuity payment will be monthly,quarterly, or semi-annually. The database management module 102 mayoptionally receive requests from an application program 108 residing onan annuity provider agent's terminal 110 to set a payment schedule forthe fluctuating annuity payment. The database management module 102 mayoptionally receive requests from an application server 140 thatmaintains a website 115 configured to receive requests to set a paymentschedule for a fluctuating annuity payment.

An additional operation 1306 illustrates receiving a request to fix thefluctuating annuity payment, and setting a payment schedule for a fixedannuity payment. For example, an annuity provider 150 including adatabase management module 102 receives a request indicating that aspecific user 101 has exercised the option to fix the fluctuatingannuity payment and in response to the request the annuity provider 150sets a payment schedule for a fixed annuity payment. Database managementmodule 102 may have received the request to fix the payment from, forexample an application program 108 residing on an annuity provideragent's terminal 110 or an application server 140 that maintains awebsite 115 configured to receive requests to fix the fluctuatingannuity payments from users 101 through 101-N. In response to such arequest, the database management module 102 may create a paymentschedule for the fixed annuity payment, e.g., setting whether theannuity payment will be monthly, quarterly, or semi-annually.

An additional optional operation 1408 illustrates generating a fixedannuity payment based on the value of one or more remaining fluctuatingannuity payments. For example, an annuity provider 150 including adatabase management module 102 generates a fixed annuity payment basedon the value of sum of the remaining fluctuating annuity paymentsdiscounted to present value of the fluctuating annuity payments using,for example, an interest rate, and a long term interest rate.

An additional operation 1510 of FIG. 8 illustrates setting a paymentschedule for the fixed annuity payment based on a long term interestrate. For example, the annuity provider 150 creates a payment schedulefor the fixed annuity payment, e.g., setting whether the annuity paymentwill be monthly, quarterly, or semi-annually wherein the fixed annuitypayment is based on a long term interest rate.

In some example embodiments the operational procedure 1200 may includeone or more of the additional operation 1612, 1614, and/or 1616 asdepicted by the operational flow in FIG. 9. In example embodiments thatinclude operation 1612, the annuity includes a provision providing for afluctuating annuity payment where the payment based on a changinginterest rate. Alternately or additionally, as depicted by operation1614, the payment may be based on the market yield of a 1-year U.S.Treasury adjusted to constant maturity.

Similar to that described above, operation 1616 illustrates that thefluctuating annuity payment may be at least a predetermined minimumpayment amount. If the fluctuating annuity payment is determined to beless than a predetermined minimum amount, then the fluctuating annuitypayment is set equal to the predetermined minimum amount, and thepayment amount that had been calculated based on the factors used (e.g.,interest rates) is not used. The predetermined minimum amount may behave been determined when the annuity was first issued or may have beendetermined subsequent to the issuance of the annuity.

The foregoing detailed description has set forth various embodiments ofthe systems and/or processes via the use of block diagrams, flowcharts,and/or examples. Insofar as such block diagrams, flowcharts, and/orexamples contain one or more functions and/or operations, it will beunderstood by those within the art that each function and/or operationwithin such block diagrams, flowcharts, or examples can be implemented,individually and/or collectively, by a wide range of hardware, software,firmware, or virtually any combination thereof.

While particular aspects of the present subject matter described hereinhave been shown and described, it will be apparent to those skilled inthe art that, based upon the teachings herein, changes and modificationsmay be made without departing from the subject matter described hereinand its broader aspects and, therefore, the appended claims are toencompass within their scope all such changes and modifications as arewithin the true spirit and scope of the subject matter described herein.

What is claimed is:
 1. A method for providing a financial instrument,the method comprising: providing a processor; generating, using theprocessor, an annuity comprising a fluctuating annuity payment and anoption to fix the fluctuating annuity payment upon request; and settinga payment schedule for the fluctuating annuity payment.
 2. The method ofclaim 1 further comprising: receiving a request to fix the fluctuatingannuity payment; and setting a payment schedule for a fixed annuitypayment.
 3. The method of claim 2 further comprising generating a fixedannuity payment based on the value of one or more remaining fluctuatingannuity payments.
 4. The method of claim 2 wherein setting a paymentschedule based on a fixed annuity payment comprises setting a paymentschedule for the fixed annuity payment based on a long term interestrate.
 5. The method of claim 1 wherein generating an annuity including afluctuating annuity payment comprises generating an annuity including afluctuating annuity payment based on an interest rate.
 6. The method ofclaim 1 wherein generating an annuity including a fluctuating annuitypayment comprises generating an annuity including a fluctuating annuitypayment based on the market yield of a 1-year U.S. Treasury adjusted toconstant maturity.
 7. The method of claim 1 wherein generating anannuity including a fluctuating annuity payment comprises generating anannuity including a fluctuating annuity payment that is greater than aminimum payment.
 8. A system for providing a financial instrument, thesystem comprising: at least one subsystem that generates an annuityincluding a fluctuating annuity payment and an option to fix thefluctuating annuity payment upon request; and at least one subsystemthat sets a payment schedule for the fluctuating annuity payment.
 9. Thesystem of claim 8 further comprising: at least one subsystem thatreceives a request to fix the fluctuating annuity payment; and at leastone subsystem that sets a payment schedule for a fixed annuity payment.10. The system of claim 9 further comprising at least one subsystem thatgenerates a fixed annuity payment based on the value of one or moreremaining fluctuating annuity payments.
 11. The system of claim 9wherein the at least one subsystem that sets a payment schedule for afixed annuity payment comprises at least one subsystem that sets apayment schedule for the fixed annuity payment based on a long terminterest rate.
 12. The system of claim 8 wherein the at least onesubsystem that generates an annuity including a fluctuating annuitypayment and an option to fix the fluctuating annuity payment comprisesat least one subsystem that generates an annuity including a fluctuatingannuity payment based on an interest rate.
 13. The system of claim 8wherein the at least one subsystem that generates an annuity including afluctuating annuity payment and an option to fix the fluctuating annuitypayment comprises at least one subsystem that generates an annuityincluding a fluctuating annuity payment based on the market yield of a1-year U.S. Treasury adjusted to constant maturity.
 14. The system ofclaim 8 wherein at least one subsystem that generates an annuityincluding a fluctuating annuity payment and an option to fix thefluctuating annuity payment comprises at least one subsystem thatgenerates an annuity including a fluctuating annuity payment that isgreater than a minimum payment.
 15. A non-transitory computer-readablestorage medium comprising a plurality of computer-readable instructionstangibly embodied on the computer-readable storage medium, which, whenexecuted by a data processor, provide a financial instrument, theplurality of instructions comprising: instructions that cause the dataprocessor to generate an annuity comprising a fluctuating annuitypayment and an option to fix the fluctuating annuity payment uponrequest; and instructions that cause the data processor to set a paymentschedule for the fluctuating annuity payment.
 16. The non-transitorycomputer-readable storage medium of claim 15 further comprising:instructions that cause the data processor to receive a request to fixthe fluctuating annuity payment; and instructions that cause the dataprocessor to set a payment schedule for a fixed annuity payment.
 17. Thenon-transitory computer-readable storage medium of claim 16 furthercomprising instructions that cause the data processor to generating afixed annuity payment based on the value of one or more remainingfluctuating annuity payments.
 18. The non-transitory computer-readablestorage medium of claim 16 wherein the instructions that cause theprocessor to set a payment schedule based on a fixed annuity paymentcomprise instructions that cause the processor to set a payment schedulefor the fixed annuity payment based on a long term interest rate. 19.The non-transitory computer-readable storage medium of claim 15 whereinthe instructions that cause the data processor to generate an annuityincluding a fluctuating annuity payment comprise instructions that causethe data processor to generate an annuity including a fluctuatingannuity payment based on an interest rate.
 20. The non-transitorycomputer-readable storage medium of claim 15 wherein the instructionsthat cause the data processor to generate an annuity including afluctuating annuity payment comprise instructions that cause the dataprocessor to generate an annuity including a fluctuating annuity paymentthat is greater than a minimum payment.